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Technical Summaries: Financing Resilience in Agriculture

The four technical summaries are all supporting of our recent focus on financing resilience in agriculture. This subject is of growing interest, relevance and importance to banks and NBFIs with interest in expanding their agricultural financing activities.

As climate variability grows due to the impact of climate change, it is critical that financiers both understand the challenges that this brings to their agricultural lending operations, but also comprehend the opportunities that financing resilience in agriculture presents. These four short notes aim to provide an introduction to thinking about this issue.

Given the increased exposure to risks that farmers are facing due to climate change, the notes examine how farmers may build their resilience to these risks by investing in new technologies and climate smart agricultural practices. The notes demonstrate that farmers will need increasing access to finance to invest in such measures and that financiers are well suited to take advantage of such needs. Also, the notes make clear that those currently providing finance to farmers need to understand the additional prevalence of risk so as to adequately assess their lending portfolio, and know how to include farmer risk mitigation for climate change into their risk assessments and due diligence approaches.

While it is tempting to focus on the additional risks of climate change in agriculture, bankers should also note the very real opportunities that financing climate smart agriculture presents. Farmers adopting CSA are much more resilient and as such much better customers and less prone to production volatility. Banks that can adequately identify and prioritize lending to CSA adopting farmers, are more able to build a stable and profitable portfolio. Similarly, the growing awareness of the relationship between agriculture and climate change has resulted in climate financiers seeking ways to support farmers adopting CSA practices and technologies, and there is a growing level of awareness of how they may do this by supporting lending institutions who work with farmers.

These notes also provide a foundation for our forthcoming conference in September which examines Financing Low-Carbon Resilient Agriculture. At the conference we will hear a great deal from both experts and climate finance investors about the opportunities for agricultural financiers to access capital, services, and facilities developed to aide resilience and mitigate carbon emissions. Our technical summaries provide a few case studies of the work that is already ongoing by forward-thinking financiers in developing countries.

AgriFin will be aiming to expand our materials and resources in this subject area in the coming months. Please share your feedback on these notes (tplamer@worldbank.org) and let us know if you have additional requests for future technical subject area notes.

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